Today, Deutsche Börse, Swisscom and three banking partners completed a blockchain proof of concept (PoC) to settle securities transactions using both tokenized shares and cash. The goal of the PoC was to show the potential for the instant settlement of securities transaction for shares of small and medium enterprises (SMEs).
For the PoC, the share register of a Swiss company was digitalized by the Swisscom start-up daura, and the shares were then tokenized. To enable instant settlement, tokenized cash was used.
Deutsche Börse provided the cash tokens in Swiss Francs through its subsidiary Eurex Clearing. Physical cash was deposited as collateral by Eurex Clearing at the Swiss National Bank.
The partner banks, Falcon Private Bank, Vontobel and Zürcher Kantonalbank, then exchanged securities tokens for cash tokens using distributed ledger technology.
“The biggest winners of a functioning digital asset ecosystem are ultimately investors and companies, particularly small and medium-sized enterprises,” said Peter Schnürer, CEO of daura.
The transaction was a novelty as it used two different blockchain protocols for processing each of the cash tokens and security tokens. Equity tokenization was carried out on Hyperledger Fabric and cash tokenization over R3’s Corda. A cross-chain secure settlement process was followed to ensure none of the parties had to make an advance payment during the settlement process, enabling delivery versus payment.
Custodigit, a joint venture between Swisscom and digital bank Sygnum, acted as the custodian for the digital assets.
Deutsche Börse and Swisscom collaborated to develop the solution, with the system hosted on Swisscom’s infrastructure. The two first announced they were working together on digital asset projects back in March.
“This proof of concept is an excellent example of successful collaboration and innovative strength across company boundaries,” said Johs Höhener, Head of FinTech at Swisscom.